Ad blockers, unusual publishers, and other 2015 tech highlights that are key to 2016

Let’s face it: 2015 wasn’t really a great year for media companies. From television majors that saw cord-cutting making a sharp dent in their valuations to online players that saw the looming threat from ad-blocking impacting the flow of advertising dollars, there hasn’t been too much good news this year.

And if we take news media – the smaller subset of the media industry that we call home – then it has really been more of a mixed bag. While the rise of ad blockers and the entry of Apple and Facebook as content distributors does threaten news media revenues and profitability, there have also been several high points as well, such as the sale of Financial Times and Business Insider.

Given that we are in December, I thought it would be a good idea to use this post to take a look at the year gone by. For me, now an outsider looking at the industry (I now oversee marketing for a soon-to-launch university), the following stood out as some of the more interesting developments and themes. Do note that the list below is in no specific order.

1. Washington Post overtakes the New York Times online.

The Washington Post has always been a distant second to The New York Times in online readership. However, thanks to a bet on social by leveraging Facebook’s Instant Articles (about which, I have more to say later), a focus on shareable content, discounted subscription packages, and some behind-the-scenes tech enhances resulting in perceptibly faster loading times, the Post overtook the Times online, achieving nearly 67m monthly uniques in October this year.

It is also worth factoring in its innovative partnership with smaller newspapers in the United States, where it bundles the online subscription free to the readers of these regional publications, thereby getting access to as many as 400,000-500,000 new readers.

The NYT isn’t sitting still. It has formed a crack team, called the Express Team, to create similar shareable content, upping the ante on its own game. It will be interesting to see how the competition amongst the two evolves over the course of the next year.

It will be also interesting to see if the Post can catch up with the Times on digital advertising. We know from its annual reports that the NYT made about US$182 million last year in digital ad revenues. This year it should do about US$200 million easily.

The Post’s latest numbers are not available as it is privately owned, but in 2012, its online revenues were around US$100 million, so it would be fair to assume it is at US$120 to US$130 million presently.

Catching up on the revenue front probably won’t be as easy, I presume.

2. Eye-watering prices for trophy assets.

The Financial Times is valued at US$1.3 billion, The Economist is near US$1.5 billion, and Business Insider’s US$442 million all represent relatively stiff prices for media businesses. While Business Insider’s numbers could be argued on the basis of its native online play, both FT and The Economist have substantial print businesses.

Still, one can argue that the FT’s print business is becoming increasingly marginal as it successfully navigates to a predominantly digital player. That leaves the Economist, which by virtue of its weekly publishing cadence, is likely to remain a strong print player for a while. In that context, the valuation it commanded was unusual.

What explains these prices? The most palatable explanation lies in the nature of these assets – their stature as global brands with sufficient digital momentum behind them. As we move toward an age of greater and greater fragmentation, the chances of a new brand being able to scale to a reasonable size (say 5 million+ monthly uniques) becomes more and more difficult. Hence the premium on those brands that can scale.

There are, of course, other specific explanations as well: Nikkei’s desperation to acquire an English-language asset, the battle between the families that control The Economist, etc.

3. Welcome to the “block” party.

The launch of iOS9 with its ability to support ad blockers led to a massive hubbub, as publishers reacted in panic to the possibility of ad blockers impacting their already thin mobile ad revenue streams. After all, by the latter part of 2015, over 200 million users had installed ad blockers on their desktops in reaction to the degrading user experience and privacy concerns (such as slow downloads due to the zillion ad trackers that were installed at the back end).

In Germany, which had the highest ad block usage, nearly a quarter of desktop visitors to a site had ad blockers installed (a reflection of users’ privacy concerns). If this carried to mobile, then it would destroy whatever limited monies publishers made on mobile.

By the end of the year though, as publishers took stock, they found out that the percentage of ad blockers installed on mobile browsers was considerably lower (in the low-single digit percentages according to Guardian, Conde Nast’s Ars Technica, and German language tech site Golem).

While it is likely to rise, the considerably slower adoption has surprised publishers (in a positive way). One possible reason for this may be the fact that most people spent far more time on apps as opposed to browsers (Flurry says 86% of mobile Internet usage is via apps).

Additionally, the power of default on mobile have something to do with this, as, by and large, people usually stick with the default options on mobile. For example, Apple’s maps app is inferior to Google maps, yet more than 80% of iPhone users use it as it is the default option on the iPhone.

With ad blockers, the power of default is further accentuated, as few people have the desire to buy paid apps for a browser that they do not use much.

4. The rise of the super-distributors.

In response to the adverse user experience I touched upon earlier and the increased data costs as a result of all those ads being pumped out, the larger platform owners, especially Facebook, saw an opportunity to create a walled garden of content.

This closed platform had the advantages of faster load times as it could do away with most third-party trackers and reduce data charges (critical in the developing world). Given that most people spent far more time on Facebook and discovered content through sharing, it made sense for Facebook to keep them locked into its ecosystem and monetise them further.

Apple and Snapchat are the other two social networks that have launched similar closed platforms. (LinkedIn, while having the potential to be one, has chosen not to focus too hard on this space. I stressed why in a previous post.)

In dealing with these closed platforms, publishers really fear getting a Faustian bargain. They get access to those readers, sure, but they give up any semblance of control. Still, publishers know they have very little choice but to engage with these networks, given the access to a large mass of consumers.

Thus far there haven’t been any overt signals from the networks that should scare publishers. These are, perhaps, the early days. However, content owners have benefited from the access to consumers. Washington Post, as we saw earlier, rode Facebook Instant to up its readership dramatically.

Increasingly, publishers (i.e. owned media) have to move to leased media — where they put their content on someone else’s brand or network. Some of this content may even be exclusive to the network. BuzzFeed has a division called Buzzfeed Distributed, which creates original, shareable content for social networks and platforms such as Tumblr, Snapchat, Facebook, etc. NowThis, an online news sites creates exclusive breaking news content for Twitter.

The above sentiment is best captured in a blog post by Joe Wikert, who says “If you’re in the business of publishing books, newspapers, or magazines, and you’re wedded to a particular container model you’ll miss out. The successful publishers will be the ones who are willing to think outside their current container(s), granulise and tag their content for reuse, and offer it in new streams and formats.”

Content, not containers, is the new mantra.

5. The rise of unusual publishers.

On the topic of content outside the traditional container models, I thought a particularly interesting trend was that of high-quality content emerging out of entirely unlikely places. The extent of high-quality content coming out of VC firms such as A16, USV, and YCombinator, to name just three, is impressive.

In fact, it is interesting to note that if you were to mask the logos and menu tabs on the home pages of A16Z and USV, they would look like home pages of media companies. This might also be the right place to revisit this astute tweet.

But it is not just VC firms. Take Priceonomics, a VC-funded start-up that sells data crawling services to businesses. It publishes high-quality content that New Yorker would be happy to carry. And the content is free!

Why does Priceonomics do this? Well, it began to publish such content to increase its ranking on Google’s organic search results page. Content was essentially a form of advertising. Over time, as the site pivoted to sell data-crawling services, it stuck with the model of using original content to generate leads for the data-crawling business. In other words, come for the high-quality content, stay to negotiate the structured data sourcing contract.

What started as a company blog is now a mini-media business: Founder Rohin Dhar compares Priceonomics’ 2.1 million uniques (data that is a year old, unfortunately) and its two writers, to Quartz, which has just over twice the audience (4.7 million uniques a month) but about 50 or so writers.

Just like the Priceonomics blog, there are many company blogs that have become quality content destinations. I have spoken about VC sites’ blog operations before. But don’t stop there. The blog page of most start-ups (i.e., the blog.X.com page where X equals the name of the start-up) is a good place to look for reasonably high quality content.

Apart from their blog pages, many founders and executives have also chosen to publish on Medium and LinkedIn. Both are really trying to solve the “where do you publish if you only have two or three posts a year in you, but want to be read” problem.

Medium is a bit more popular with start-up founders and the Silicon Valley ecosystem though, and seems to have picked up terrific momentum in 2015.

It raised US$57 million this year, and is valued pre-money at US$400m. It was particularly interesting that Amazon and NYT chose to duke it out on Medium after the controversy over NYT’s story of Amazon’s bruising work environment was released.

A related example here is user-generated content on a company’s Web site. Look at a site such as soylent.me, the food replacement company. Its online fora are a rich source of discussion around food, nutrition, biotechnology, etc.

Chris Dixon, the A16Z investor who led the investment into Soylent, describes it as a phenomen of “companies that appear to be focused on selling X but are really online communities that happen to make money selling X.” Another interesting example is GoPro’s channel page, which features content shot by their camera users.

The last word on this topic goes to crowdfunding site Kickstarter, which has recently hired a journalist to investigate the curious case of a company that went bust after raising US$3.5 million on Kickstarter to fund a drone project. The idea behind hiring the journalist is to “help the backers of this failed project get the information they are entitled to under their agreement with the project creator. They would like to uncover the story, from its inception to the present, and decided that the best way to do that was to hire a journalist.”

Reading this, I am reminded of Mark Cuban’s Sharesleuth, which was an innovative take on publishing and leveraging investigative journalism.

6. Understanding paywall as a tactical weapon.

During the year, we saw several seemingly contradictory strategies around the paywall. Once again, the action was led by the British dailies.

Financial Times — which pioneered the metered model that The New York Times, The Washington Post, and most other newspapers have adopted — decided to move to a harder paywall, one that the Times in the United Kingdom had adopted. Meanwhile, the Sun, which along with Times, is part of Murdoch’s News Group, dropped the hard paywall it had adopted.

It is probably best not to see these in terms of a universal strategy. I don’t think there is one as far as paywalls go. Sun’s strategy or tactics are determined by the actions of its bête noire, Daily Mail. Daily Mail has cannily built the largest online audience for a news site using an addictive mixture of celebrity content, sleaze, and right-wing tabloid fodder, all of it free. The Sun, for all its strength in print, woefully lagged behind when it came to online content, trying to make people pay for celebrity content (and football). Clearly it is trying to remedy that by opening up its paywall.

FT’s moves are a bit more complex; I covered this in one of my previous posts. Fundamentally it has everything to do with the difficulty in monetising online audiences for advertising. As it gets harder and harder to do that, it becomes less and less important for publishers to aggregate lots and lots of casual audiences, and they miss out on the chance to monetise potential readers through subscription fees.

Clearly the FT and Times have been able to do that given the brand loyalty of their customers (and at least in FT’s case, being able to get their companies to pay for them). I really can’t see one of the smaller mid-rung brands trying this, or even a premium brand with strong competitors who can give their content away.

7. Rise of digital-only news sites in India.

It wouldn’t be fair to conclude without a look at the Indian market. For one, that is where I am based. But secondly, and more importantly, India continues to be one of the few growth areas for print globally.

The most interesting development in the Indian news media space was clearly the sudden proliferation of a host of online-only news-and-commentary sites modelled on Quartz and HuffPo. Scroll, led by ex-editor of Time Out, Naresh Fernandes, was first off the blocks.

It has been followed in quick succession by TheQuint (from Raghav Bahl), The Wire (by ex-editor of The Hindu, Siddharth Varadarajan), CatchNews (from Rajasthan Patrika Group), and DailyO (from India Today Group), in addition to the local affiliates of global majors such as HuffPo and Quartz.

The reason, as this article argues, lies in the burgeoning online reach; the number of Indian Internet users has crossed 300 million, led primarily by expanding smartphone penetration. A key challenge that all these sites will face is on the ad front: Online advertising is only approximately 10% of the share of all advertising.

It is growing fast, and will continue to increase its share. But the display ad market (where these brands compete) is likely to be hobbled in the long run by ad blockers, the continuing dominance of traditional major players like Google and Facebook, and possibly the rise of mobile, which is harder to monetise on the ad front.

In the long term, there will certainly be a shakeout, but, for the present, the Indian reader is spoilt for choice.